What is "winning the game" exactly?

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What is "winning the game" exactly?

Post by JohnFiscal » Mon Jan 08, 2018 2:00 pm

From author Dr. Bernstein (and discussed in numerous threads here) we read about possible desirability to quit playing once the game is won (my paraphrase).

This is the title of another new thread (a timely one for me) but I post separately as I don't want to sidetrack that thread.

But I wonder what exactly does "winning the game" mean?

In my case, I am within months of retirement. I've tried to adjust and roll-back my asset allocation. But based on my analysis of expected monetary needs for a long retirement (including for spouse, who is 11 years younger), accounting for SS, etc, I have to depend on two points:

(1) running my savings balance down (I don't have enough capital to simply live on the gains), likely not down to zero, but the level has to run down.

(2) And I have to depend on the returns from both equities and bonds.

I think that if I had really "won the game" I would be able to cash in everything, put the proceeds in a ST bond fund (or plastic wrapped bales of 20's) and live out my life. Since doing so would not allow me to live the style that I would like to live (which is not fancy), then perhaps I have not yet won the game?

For reference, I'm looking at $2+mil nest egg and planning for longevity of both spouses to early-mid 90's. I have run FIREcalc a number of times, but mostly depend on iORP for analyses (as well as on my own spreadsheets). I'm hoping to have spendable income of up to $100k in current dollars. iORP would seem to support that. Have I won the game?

Thanks for comments.

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Re: What is "winning the game" exactly?

Post by racy » Mon Jan 08, 2018 2:11 pm

I don't know if you've won, but for the record, this from the guy who said it:

Bernstein was asked “How much exposure should people have to stocks.” He answered:
"A lot of people had won the game before the [2008] crisis happened: They had pretty much saved enough for retirement, and they were continuing to take risk by investing in equities.
Afterward, many of them sold either at or near the bottom and never bought back into it. And those people have irretrievably damaged themselves.
I began to understand this point 10 or 15 years ago, but now I’m convinced: When you’ve won the game, why keep playing it?
How risky stocks are to a given investor depends upon which part of the life cycle he or she is in. For a younger investor, stocks aren’t as risky as they seem. For the middle-aged, they’re pretty risky. And for a retired person, they can be nuclear-level toxic."

William Bernstein recommends a rule of thumb, based on annuity payouts and spending patterns late in life, that you should have 20-25 times your residual living expenses (after pensions/Social Security) invested solely in safe assets. No stocks at all. This should be in TIPS, SPIAs and short-term bonds. If you have more than that, that’s your “risk portfolio,” which he describes this way:

Anything above that, you can invest in risky assets. That’s your risk portfolio. If you dream about taking an around-the-world trip, and the risk portfolio does well, you can use it for that. If the risk portfolio doesn’t do well, at least you’re not pushing a shopping cart under an overpass.

https://www.whitecoatinvestor.com/berns ... -the-game/

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Re: What is "winning the game" exactly?

Post by skjoldur » Mon Jan 08, 2018 2:13 pm

Check out this thread on the same topic


Berstein himself participates to clarify a bit.

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Re: What is "winning the game" exactly?

Post by randomizer » Mon Jan 08, 2018 2:43 pm

For me truly winning would mean having 40x expenses but I don't expect to ever get that far and so will shoot for a weaker definition of getting as close to 25x as I can. (May require me to work indefinitely? Or not. All depends on the unforeseeable.)
75:25 AA / Expected retirement: 2097

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Re: What is "winning the game" exactly?

Post by TomatoTomahto » Mon Jan 08, 2018 2:52 pm

We consider ourselves to have won the game, although DW continues to work. We could probably cut it closer, but as much to stop thinking about asset allocation as for any other reason, I decided that we’d put $3M in fixed income (not Bernstein approved ST bonds, SPIA, or TIPS, but mostly TBM and Stable Value Fund). Dividends are reinvested. Everything else, old money or new, goes into equities and (potentially) other risky assets.

After SS and pensions, when DW quits bringing in a paycheck and the deferred comp runs out, I think we might never need to touch the Fixed Income portion, but it’s nice to know that it’s there. The lion’s share will go to kids and charity when we die; I expect to spend little of it, percentage-wise.

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Re: What is "winning the game" exactly?

Post by JohnFiscal » Mon Jan 08, 2018 3:10 pm

Thank you both racy and skjoldur for very useful replies. These give fantastic info.

I have several half-read Bernstein books going and I'd better get them finished, but I'm pretty familiar with the indicated comments. It is valuable to me to get the refresher course.

This information (Bernstein's concept) is really valuable to me as distinct from just figuring asset allocation. Trying to determine AA seems to me to be a hit or miss type of event, whereas I can certainly crunch the numbers to get residual living expenses (which would not include "fun" money) and multiply that by 20-25, and use that as a target.

I must have had something in mind like that over the past few years (probably a seed from Bernstein, et al) as I was not especially worried about my AA due to a large amount in bonds and cash. But now I have a more rigorous theoretical basis, and a system, to follow. Great!

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Re: What is "winning the game" exactly?

Post by goodenyou » Mon Jan 08, 2018 3:14 pm

It is different for everyone. The concept, in my mind, is no longer having to depend on earned income;income that depends on setting an alarm clock. It is maintaining a lifestyle of your choice and having a legacy of your choice by withdrawing from a nest egg that has historically a near zero chance of running out before you do. I have reached my number in theory, but I continue to produce in order to consume more while I am young and the kids are still on the payroll. I work because I am highly compensated to do so, and I have freedom to take as much time off as I want.
"Ignorance more frequently begets confidence than does knowledge" | "The best years you have left are the ones you have right now"

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Re: What is "winning the game" exactly?

Post by prudent » Mon Jan 08, 2018 3:19 pm

IMHO it's something each person has to define for themselves. Some want 40x expenses not counting SS, others feel they have reached it with 25x expenses counting SS. Some assume doing some work after retirement from their "real" job, others don't. Some can't bear to spend down their savings, others are OK with it as long as they don't run out until their demise. And age of retirement is certainly relevant.

For me it would be 25x expenses at age 65, taking SS at 70 assuming current benefit levels, not working for pay any longer, OK with spending down savings in retirement, life expectancy of 95 for last-to-die spouse, and assuming I can trim spending by 25% if necessary. And I assume a "real" (after inflation) return of a modest 2% in retirement.

While some of those variables might need to change, one thing that won't change is a willingness to spend down savings. I won't live only on interest and dividends just to leave an estate.

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Re: What is "winning the game" exactly?

Post by midareff » Mon Jan 08, 2018 3:24 pm

John.... I understand the younger wife thing.. I'm 70 she is 54. AFAIC, I have won the game. There is 18 years of draw for trasvel and luxuries in FI, exclusive of any dividend distributions and I assume that after the next 5 to 7 years I will spend less and travel less. My cola'd pension and SS pays all the monthly essentials. If I pass before or after that she will have a large enough portfolio and SS to return to her home country (Bangkok) and live out her life in luxury except she will probably become a nun and live in a temple.

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Re: What is "winning the game" exactly?

Post by Earl Lemongrab » Tue Jan 09, 2018 4:56 pm

The problem is that the game never ends (at least until you do) and the rules keep changing. It's difficult to declare victory.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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